BoAML upgrades growth projection for Poland in 2011

Bank of America Merrill Lynch (BoAML) has made a substantial upward revision of its forecast for economic growth in Poland in 2011, in response to better-than-expected domestic demand figures.

The US bank now expects the Polish economy to expand by 3.5% this year, up from a previously projected 3%. Its earlier forecast had presumed that consumer confidence would not last, undermined by sluggish labour market recovery and a strengthened Swiss franc. BoAML speculates that part of the reason for the unexpected strength of private consumption in recent weeks may be that many Poles working in Germany were able to legalise their status after 1 May and were more willing to spend the money earned there in Poland; a rise in mortgage refinancing has helped as well, by releasing extra funds that were probably directed to consumption.

At the same time, business investment is recovering in line with expectations. According to the bank, if companies decided to keep inventories at their current high level, this might add a further 0.3-0.7 points to GDP growth. However, a sharper rebound in investment seems unlikely, given a deterioration in perceptions of the economic global outlook among Polish firms.

The upgraded forecast is still below the long-term trend rate of 4%, BoAML noted.

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